Contractors Center Point provides value updates and information for the construction community as it relates to stimulus, green building and projects, current econominc data and conditions and overall financial and tax solutions for the construction community.

May 2010

05/24/2010

The price of construction materials and supplies rose 1.1 percent in April, according to the May 18 producer price index (PPI) report by the U.S. Labor Department. This marks the sixth straight monthly increase. Prices for construction materials are up 5.7 percent from the same time last year (see graph below).

Prices for iron and steel jumped 5.1 percent last month and are 37.7 percent higher from April 2009. Similarly, steel mill product prices are also up 5.1 percent and are up 24.7 percent from the same time last year. Softwood lumber prices continue to trend higher as they increased 4.5 percent for the month and are 28.5 percent higher on a year-over-year basis. Nonferrous wire and cable prices increased 1.6 percent last month and are up 12.4 percent over the past twelve months. Prices for fabricated structural metal products increased 1.1 percent in April, but are down 1.5 percent compared to the same time last year. Price fluctuations in plumbing fixtures and fittings continue to be marginal as they increased 0.3 percent for the month and are up 0.8 percent from April 2009.

In contrast, prices for prepared asphalt, tar roofing, and siding fell 0.6 percent for the month and are down 5.8 percent from April 2009. Prices for concrete products also fell 0.3 percent last month and are down 2.2 percent from the same time last year.

Crude energy prices slid 5.9 percent in April and natural gas prices fell by 19.2 percent. Over the past three months, crude energy prices are down 10.8 percent after jumping up 24.5 percent from the previous three month period.

Overall, the nation’s wholesale prices are down 0.1 percent for the month, but are 5.7 percent higher from the same time last year. However, core prices, which exclude energy and food, are only up 1 percent from April 2009.

05/17/2010

Let's say you're an electrical contractor. One of your employees bumps into an unoccupied scaffold on a construction site and destabilizes it. Which actions should you take to ensure the safety of workers and avoid liability?

A. Move everyone out of the way when painters get on the scaffold.B. Fix the scaffold.C.Warn everyone who is at risk

D. Report the incident to the general contractor.

If you answered C and D, you're correct. Responsibility and liabilityon a job site with several employers depends on each employer's role in the project.

In 1999, the Occupational Safety and Health Administration (OSHA) enacted a multi-employer worksite doctrine that bases safety responsibility on the role various employers play on a construction project. In general, employers can be held responsible for workers other than their own and more than one employer can be cited for the same violation.

OSHA identifies four types of employers who are potentially citable for hazardous conditions that violate federal standards:

1. The Exposing Employer is one whose own employees are exposed to a hazard. These employers must exercise "reasonable care" to correct hazards

An Example from OSHA: "Employer M" hoists materials onto Floor 8, damaging perimeter guardrails. No worker on the site is exposed to the hazard. Although it lacks authority to fix the guardrails, Employer M takes effective steps to keep all workers, including those of other companies, away from the unprotected edge and informs the controlling employer of the problem. Analysis: Employer M is a creating employer because it caused a hazardous condition by damaging the guardrails. While it lacked the power to fix the damage, it took immediate steps to keep all employees away from the hazard and notified the controlling employer. Employer M is not citable since it took effective measures to prevent employee exposure to the fall hazard.

if they have the authority to fix them. OSHA requires frequent and careful inspection to prevent hazards and to promptly remedy them. What if you don't have the authority to correct a potentially dangerous situation? You must take all feasible measures to minimize employees' exposure and ask another employer to correct the hazard. If there is imminent danger, the exposing employer must remove its employees from the job.

2. The Creating Employer is the one who caused the hazard. In this case, you must keep all employees - not just your own - away from the hazard and notify the employer who controls the work site. If you have the authority to correct the hazard, you must do so promptly.

3. The Correcting Employer is the one responsible for fixing a hazard. This may be any employer on the site who is authorized to correct the problem. For example, as electrical contractor, you wouldn't be authorized to fix the scaffold in the incident described above, but you would be authorized to correct an electrical hazard.

4. The Controlling Employer or Manager has authority to manage all the other (exposing, creating and correcting) employers. This employer is citable for failing to prevent, discover or correct a hazard. In the absence of a contractually defined role, the controlling employer is the one exercising supervisory authority over the worksite.

To limit exposure, here are some common-sense rules to follow.

Before anyone picks up a tool, make sure contract terms define the worksite responsibilities of the facility owner, contractors and subcontractors. Identify the creating, exposing, correcting and controlling employers. Make certain that actions on the worksite conform to the terms. Renegotiate contract terms before doing work outside the scope of the contract.

05/10/2010

Associated Builders and Contractors (ABC) April 28th expressed concern over a proposal being considered by the U.S. House of Representatives Committee on Ways and Means and the U.S. Senate Finance Committee that would significantly increase payroll taxes paid by S corporation shareholders. The plan is being proposed to offset the costs of the Tax Extenders Act of 2009 which would extend tax cuts that expired at the end of 2009 through 2010.

Although the proposal is not finalized, it is expected to expand the application of payroll taxes to active shareholders of S corporations that are primarily engaged in “the performance of services.” A letter signed by ABC and 10 other organizations, sent to House Ways and Means Committee Chairman Sander Levin (D-Mich.) and Senate Finance Chairman Max Baucus (D-Mont.), used as an example an architectural firm whose revenue is split between architectural services and sales of architectural books. Under the new proposal, payroll taxes could apply to the percentage of the example firm’s revenue gained from the architectural services that is distributed to the shareholder, regardless of any capital investments made by the shareholder, including human capital.

“By blurring the line between income from labor and income from capital, this proposal will set the stage for future increases in payroll taxes on more capital-intensive sectors such as manufacturing and agriculture,” the letter stated. ABC pointed out that when the tax is applied to the service sector, it will hurt the ability of companies to invest in and create jobs.

ABC also noted the proposal conflicts with Congress’ decision not to apply the 3.89 percent tax in the health care reform bill to S corporation shareholders. The new proposal effectively reverses that decision.

For more information on this proposal please contact David B. Blain at dblain@macpas.com.

05/03/2010

On Friday April 23rd, McKonly and Asbury, LLP with representatives from Murray Risk Management and Insurance and Reager and Adler, PC held the Spring Construction Conference at the Harrisburg/Hershey Sheraton. The day provided a number of educational sessions from tax and finance, insurance, bonding and legal updates for the construction industry.

Mr. Joseph Ritchey from Murray Risk Management and Insurance started the day with a general discussion on employment practice liability awareness and wage and hour claims information and analysis. Mr. Ritchey discussed United States Department of Labor statistics as it relates to collection of back wages, violations of overtime security regulations, child labor enforcement and Family and Medical Leave Act enforcement. Mr. Ritchey left the audience with a core policies and practices document that can be used and tailored to a construction companies use on ethics, equal employment opportunity, open door policies, health and safety, confidentiality and other core employment practices and policies.

Mr. Jason Skrinak from McKonly and Asbury, LLP provided a construction state and local tax update. Mr. Skrinak discussed a number of changes with state tax regulations as it pertains to capital stock and foreign franchise taxes and corporate net income tax. Mr. Skrinak also discussed the Commonwealth of Pennsylvania’s tax amnesty program and semi-monthly sales and use tax reporting requirements. Lastly, Mr. Skrinak discussed a number of new tax initiatives that the legislature is investigating as well as a general discussion on the current multi-state tax environment.

Mr. Tom Williams of Reager and Adler, PC. led two discussions on employment workplace classification and Alternative Dispute Resolution (ADR). Mr. Williams discussed the number of laws that pertain to workplace classification issues, the regulatory bodies involved, evidence to consider when classifying an employee in the workplace and factors used to determine whether a person is an employee. Mr. Williams also discussed ADR and its many intricacies. More specifically, Mr. Williams discussed the federal and state arbitration acts, arbitration procedures, appeal rights and mediation.

Mrs. Lydia Mantle of Murray Risk Management and Insurance discussed a number of emerging issues in surety bonding. Mrs. Mantle discussed the view of banks and surety companies in the current economic climate. Mrs. Mantle also discussed federal contracting opportunities from where to find them, how to qualify and how to get started on the bidding process.

The last presentation of the day was provided by McKonly and Asbury, LLP on fraud proofing your construction company. Mr. Sam BowerCraft and Mr. Mike Hoffner discussed the factors that cause one to carry out a fraud and how to prevent fraud through a number of different methods and techniques.

The seminar was closed out by a panel discussion from representatives from McKonly and Asbury, LLP, Reager and Adler, PC and Murray Risk Management and Insurance in which they discussed a number of topics that are impacting today’s construction community.

For more information please contact David B. Blain construction segment leader, at dblain@macpas.com.